Recently it was revealed that Bitmain, who is the leading hardware development company for cryptocurrency mining operations throughout the world, is nearing the 51% hash rate mark on the Bitcoin blockchain.
They account for a considerable percentage of the mining hardware sold, and their dominance is that area is getting stronger as time goes by. Last year they had about 4 billion in profit from their mining operations, and anyone in the game knows their hardware (application specific integrated circuits or ASIC) can beat out GPUs for cryptocurrency mining.
Bitmain’s Antminer Z9 mini, which hashes around the equivalent of 15 1080Tis (GPU), 300 watts, and 10,000 Sol/s that likely will be able to produce even a bit more than that given their history of exceeding the proclaimed parameters for their hardware.
With this equipment, Bitmain also does their own mining, which is why they are so good at what they do because necessity is the mother of invention, and their ascension to the 51% mark is making people nervous because this defeats the purpose of decentralization when any one company has a majority. This isn’t the first time that something like this has happened, but it is the first time that one centralized company has so much control and influence over something that, in theory, should be distributed out over a much broader area.
Everyone likes to think Bitcoin is a much-decentralized operation, and it is if you think about in terms of who owns it. But while all of that is true one can also see that these coins aren’t really decentralized as everyone thinks, and there are intrinsic issues with coins having smaller caps in the past year that brings these half-truths to the surface.
Not that Bitmain would do anything to hurt Bitcoin, but if they’re putting in the cheese it takes to gain over 50% of the Bitcoin hash rate, and to mine more coins out of the pool than anyone else possibly could.
However, this development shows us that the Bitcoin Blockchain isn’t truly decentralized if this is allowed to continue, no matter how much we want it to be, and if most of the new coins coming into the Bitcoin economy are going to one pool (Bitmain), one has to ask themselves if that is bullish or bearish?
If one were to go down the rabbit hole and imagine all the things that could happen as this all develops it could get scary. Having a singular majority position would certainly make it possible for Bitmain, if they wanted, to manipulate all kinds of things in favor of their own profits.
One proposal put forward by Ghash, who is another mining operation that reached the 51% mark some time ago causing a huge controversy, is that miners move their resources into different pools so that no one can have a singular majority in any one pool. This was a great idea, but there are differences between Ghash and Bitmain that will probably stand in the way.
Ghash was not a mining corporation dedicated to the production of mining hardware and using it for their own operations keeping the best equipment for themselves until they decide to let others take advantage of it, probably because they have even more advanced equipment running. Ghash was a collection of small miners that bonded together and formed a union. When there ended up being too many miners who had joined, causing it to hit the 51% mark, Ghash asked some of them to vacate the pool and they did. So that makes it a different situation for Bitmain as they have their own miners and their own pools.
Another unlikely solution to this problem would be to change the Bitcoin Proof of Work algorithm, which is unlikely due to security issues that could come from such a move. This just shows, as time goes on, it is becoming more difficult to know how to make money with bitcoin.
So what is the solution? That is something yet to be addressed, but while this issue is troubling, it must be said once again that there is no proof that Bitmain has any bad intentions, and if their intentions are pure, there should be no need to worry. However, this goes to show a crack in the decentralization theory, and whether that makes you nervous or not is up to the person. One thing is clear, for decentralization to continue we all need to play by the unwritten set of rules that come with cryptocurrency mining. Without that, what do we really have?
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